The Volatile Price of Lumber and how You Should Respond

Earlier this month, West Fraser was the first lumber company to announce a widely feared and anticipated price hike on wood. Despite months of speculation that Canadian lumber mills would increase prices to offset a potential countervailing duty (CVD), this is creating panic and confusion. Here is some information to help clarify what is happening, what to expect, and how you should proceed with an inventory strategy.

Problem:

Part of the confusion is because we won’t know if a CVD will be imposed until April 24th. All action taken thus far has been in fear of what people believe will be a 20% – 40% duty inflicted on Canadian lumber entering the United States. West Fraser’s announcement created chaos in the market, prematurely driving up lumber prices, impacting trade levels, and creating overall volatility that will likely remain until the duty issue has been settled.

What exacerbates this situation is a shortage of rail cars. This is a problem for both eastern and western mills, though seemingly a bigger issue in the west. This is influencing whether mills can fill reloads as well as timing of deliveries from Canada. Of course, the rail problem then extends to other transportation, meaning it’s creating a truck shortage as well.

Result:

While the prices have fluctuated significantly over print, they are currently pretty reliable. Experts believe the market will be slow as we all wait for the US Coalition to announce its decision on the CVD. Mills don’t want to risk shipments not getting across the border before the CVD is enacted.

Industry experts also expect prices to continue to rise through mid-May. Therefore, the concern is whether US plants and distributors have enough wood to last that long.

What to do:

With such an unpredictable market right now, industry leaders are recommending the following for those purchasing lumber to distribute:

Check your inventories; if you need wood, buy it sooner than later. However:

It is unwise to make a big buy right now while there are so many unknowns

Price defensively and sell off of replacement costs until the market steadies itself

Stay closely in tune with your inventory needs and in communication with your buyers

Understand that this may take longer than mid-May to sort out. Stay as lean as possible

Packnet creates industrial packaging solutions that include wood crates, containers, and pallets. We stay current on the regulations, fluctuations, and anticipated changes concerning the lumber industry. Our wood packaging meets all necessary requirements, and we also offer non-wood solutions. If your packaging needs to be a perfect fit, give us a call: 952-944-9124.